How many "Joe Sixpacks" have 20k to lose?

[John Adams]

Also, buying a house shouldnt be everyone's rush. I invested in my 401K (to match what my employer was giving) when I was an hourly employee when I was in night school undergrad. Over time, I bumped that up and when I was still in my 20s, I tapped that money (which had grown to some 25K after taxes and withdraw penalty...the 401K balance was maybe 40K) to put a down payment down on the small house I still live in.

 

That was a stupid decision driven by the "need" to buy a house. If I had just saved for 4 more years in cash (maybe foregoing the 401K savings a bit), I could have had the down payment for the house and that 40K in 401K would be worth over $200,000 (if I stopped contributing the day I bought the house) today. That pisses me off.

 

People rush to buy houses for tax breaks, as investments, because paying rent is "burning money." It's often the wrong decision. You get almost no equity in your house for a long time so you're burning money (and more of it) to live in a house. You have loads of extra bills. And the tax breaks don't begin to offset the outlay in money spent. As an investment, housing values historically barely beat inflation. The two exceptions are the last decade and the one right after WWII. You buy a house because you want it; not because it makes a ton of financial sense.

[GG]

The best advice any 20-yr old starting out in a job can heed is to automatically throw 5% into a 401k plan and forget about it. This way, the net paycheck is 4% lower than what it would have been and you adjust your lifestyle to that. People in general are very bad in consciously allocating money to a saving plan, so if it's done automatically, it's one less thing to worry about.

[Pine Barrens Mafia]

I'm going to start demanding royalties for the use of my name.

[KD in CA]

I'm going to start demanding royalties for the use of my name.

 

Where are Ahr & Ahr Associates when you need them?

[bills_fan]

Also, buying a house shouldnt be everyone's rush. I invested in my 401K (to match what my employer was giving) when I was an hourly employee when I was in night school undergrad. Over time, I bumped that up and when I was still in my 20s, I tapped that money (which had grown to some 25K after taxes and withdraw penalty...the 401K balance was maybe 40K) to put a down payment down on the small house I still live in.

 

That was a stupid decision driven by the "need" to buy a house. If I had just saved for 4 more years in cash (maybe foregoing the 401K savings a bit), I could have had the down payment for the house and that 40K in 401K would be worth over $200,000 (if I stopped contributing the day I bought the house) today. That pisses me off.

 

People rush to buy houses for tax breaks, as investments, because paying rent is "burning money." It's often the wrong decision. You get almost no equity in your house for a long time so you're burning money (and more of it) to live in a house. You have loads of extra bills. And the tax breaks don't begin to offset the outlay in money spent. As an investment, housing values historically barely beat inflation. The two exceptions are the last decade and the one right after WWII. You buy a house because you want it; not because it makes a ton of financial sense.

 

 

I don't necessarily agree about buying property. I used my first year-end bonus ($7,500), plus what I had saved (not including 401K savings) as a down payment on a tiny little studio apartment in Hoboken NJ. It was about 300 square feet. I was able to get tax deductions and build equity. I sold it just over three years later and made enough to put a down payment on a small one bedroom on the UES. I just kept trading up from there. I'm on my 5th place right now. I think buying something modest and trading up is a very good way to go.

[Pine Barrens Mafia]

Not "spending" at all. Like most Americans we're getting by. It's laughable to hear people blurt out nonsense like "suck it up and put away money." You don't think people would if they could? You think everyone that's just living within their means can just sock money away? The problem is that you just assume everyone is lazy or throwing money around in some spending frenzy. You're wrong. Don't get me wrong, my family is not poor. We both work our tails off, have a car, a condo. We saved our asses off so we could both get an education. We saved our asses off to get a car. Then we saved our asses off to get the condo. Now we're saving our asses off to start a family. Then I'll probably have to work two jobs so my wife can quit hers because daycare costs so much. Then it's saving for the kids college. It's ludicrus to think people are choosing to not save money for retirement. It's just not that simple.

 

Anyone can retire rich, if they own a home and properly use their home's equity.

[Pine Barrens Mafia]

I don't necessarily agree about buying property. I used my first year-end bonus ($7,500), plus what I had saved (not including 401K savings) as a down payment on a tiny little studio apartment in Hoboken NJ. It was about 300 square feet. I was able to get tax deductions and build equity. I sold it just over three years later and made enough to put a down payment on a small one bedroom on the UES. I just kept trading up from there. I'm on my 5th place right now. I think buying something modest and trading up is a very good way to go.

or, what if you stayed in the same place, refinanced every couple of years to pull out your equity and invest the equity in an equal or greater interest-rate fixed investment?

 

Then, my friend, you'd be building wealth like a bank does. With arbitrage.

[bills_fan]

or, what if you stayed in the same place, refinanced every couple of years to pull out your equity and invest the equity in an equal or greater interest-rate fixed investment?

 

Then, my friend, you'd be building wealth like a bank does. With arbitrage.

 

 

And once I am in a place that I plan to stay in for a while, that would be a great idea. As is, I just follow the Jeffersons motto...movin' on up!

[John Adams]

I don't necessarily agree about buying property. I used my first year-end bonus ($7,500), plus what I had saved (not including 401K savings) as a down payment on a tiny little studio apartment in Hoboken NJ. It was about 300 square feet. I was able to get tax deductions and build equity. I sold it just over three years later and made enough to put a down payment on a small one bedroom on the UES. I just kept trading up from there. I'm on my 5th place right now. I think buying something modest and trading up is a very good way to go.

 

Every situation is different. My point was more this: Buying a house isn't always the best decision. It worked for you--values went up and you didn't tap your retirement account. Most people only build home equity if property values go up; building sweat or monetary equity is less common.

[bills_fan]

Every situation is different. My point was more this: Buying a house isn't always the best decision. It worked for you--values went up and you didn't tap your retirement account. Most people only build home equity if property values go up; building sweat or monetary equity is less common.

 

 

True, prices rise. But you also make improvements. I have done new bathrooms/kitchens/floors/paint in every place I have owned. I figured out how to do it myself, working from one of those books you buy at home depot on the weekends. I never put expensive stuff in, but was able to put new stuff that was nice in the places. That helped the re-sale value a lot.

[JoeFerguson]

Bad choices like eating or paying for heat?

 

Sure, the math supports you idea that putting aside $100 a month will return 300k in 40 years. But the reality is life isn't like that. People get sick. People have accidents. People get laid off. People end up with unforeseen burdens. It's unrealistic to think that the average person jamming 100 bucks into a mattress is going to see that 300k after 40 years.

 

 

Calculate how much you have spent in your lifetime on your vinyl record collection.

 

Then take that number and do a quick calculation on how much you would have today if you had invested that money.

 

The people who are taking the counterargument with you are the ones who decided not to excessively blow their money on stuff they didn't need.

[DC Tom]

Calculate how much you have spent in your lifetime on your vinyl record collection.

 

Then take that number and do a quick calculation on how much you would have today if you had invested that money.

 

The people who are taking the counterargument with you are the ones who decided not to excessively blow their money on stuff they didn't need.

 

I heard a commercial on the radio this morning for some health care plan: "Money was tight, and as a single mom I had to make cuts somewhere, so I cut out health insurance. Blah blah blah, yada yada yada, then I found a plan that costs less per month than my monthly coffee expenses..."

 

And I'm thinking to myself "What yahoo cuts health insurance out of their expenses before they cut their friggin' Starbucks intake????" Yeah, I know it's just a commercial...but how many people would actually question that decision? The real reason the economy's so screwed up is because Americans' priorities are.

[blzrul]

C'mon, they are in the upper part of the middle class. If you are calling that rich - two well-paying salaried jobs - then we are in for one wild ride under Obama.

I am NOT calling that rich. And, I make more than that and do not consider myself rich. But I would NEVER consider myself a Joe Six Pack - I am upper middle class. Joe Sixpacks are the folks in the true middle.

 

My original statement had to do with the "out of touch" thing. She's either full of CRAP that she lost $20k this week alone...or she lost 20K because she was invested VERY badly OR she has a whole lot in her account (so $20k would be a drop in the bucket). I have six figures in my retirement and didn't lose $20k and I am no Warren Buffett....

[ExiledInIllinois]

I am NOT calling that rich. And, I make more than that and do not consider myself rich. But I would NEVER consider myself a Joe Six Pack - I am upper middle class. Joe Sixpacks are the folks in the true middle.

 

My original statement had to do with the "out of touch" thing. She's either full of CRAP that she lost $20k this week alone...or she lost 20K because she was invested VERY badly OR she has a whole lot in her account (so $20k would be a drop in the bucket). I have six figures in my retirement and didn't lose $20k and I am no Warren Buffett....

 

BINGO! Same here!

[ExiledInIllinois]

I heard a commercial on the radio this morning for some health care plan: "Money was tight, and as a single mom I had to make cuts somewhere, so I cut out health insurance. Blah blah blah, yada yada yada, then I found a plan that costs less per month than my monthly coffee expenses..."

 

And I'm thinking to myself "What yahoo cuts health insurance out of their expenses before they cut their friggin' Starbucks intake????" Yeah, I know it's just a commercial...but how many people would actually question that decision? The real reason the economy's so screwed up is because Americans' priorities are.

 

Exactly... Default on everything that isn't tied down... Stop spending and get the priorities back on track.

[Johnny Coli]

Calculate how much you have spent in your lifetime on your vinyl record collection.

 

Then take that number and do a quick calculation on how much you would have today if you had invested that money.

 

The people who are taking the counterargument with you are the ones who decided not to excessively blow their money on stuff they didn't need.

Investing money instead of buying records over the course of 30 years? Listen to yourself. The argument is stupid. The $8 record I bought in 1985 is worth more to me personally than whether I'd put that $8 into some account for 45 years. Music, art, etc can't be compared to money. People buy things that add value to their everyday lives. Records, a pair of sneakers, a ticket to a ball game. You, and others, aren't even looking at quality of life. How many of you people spent money on stuff other than your retirement? I can guarantee that the majority, if not all but one or two of you, weren't saving for freaking retirement at age 20.

 

I had a damn good time, went back to school when I was done, and am pretty comfortable with how I lived my life. I wouldn't change a thing. You might think having a minor retirement package at my age, while having a room full of LPs bought over almost 30 years is stupid. I disagree, and I'm pretty sure I'm not alone in that aspect. I have a condo, a fabulous job, a smoking hot wife that I met because I was having fun playing in a band, and we save our fair share. And I bet I'll end up with more in the end than some moron who didn't buy anything and saved every penny instead of living a full life.

[GG]

Investing money instead of buying records over the course of 30 years? Listen to yourself. The argument is stupid. The $8 record I bought in 1985 is worth more to me personally than whether I'd put that $8 into some account for 45 years. Music, art, etc can't be compared to money. People buy things that add value to their everyday lives. Records, a pair of sneakers, a ticket to a ball game. You, and others, aren't even looking at quality of life. How many of you people spent money on stuff other than your retirement? I can guarantee that the majority, if not all but one or two of you, weren't saving for freaking retirement at age 20.

 

I had a damn good time, went back to school when I was done, and am pretty comfortable with how I lived my life. I wouldn't change a thing. You might think having a minor retirement package at my age, while having a room full of LPs bought over almost 30 years is stupid. I disagree, and I'm pretty sure I'm not alone in that aspect. I have a condo, a fabulous job, a smoking hot wife that I met because I was having fun playing in a band, and we save our fair share. And I bet I'll end up with more in the end than some moron who didn't buy anything and saved every penny instead of living a full life.

 

But isn't the whole point of the debate is that '40 somethings could have six figure retirement savings if they properly planned for it?

[Chef Jim]

Investing money instead of buying records over the course of 30 years? Listen to yourself. The argument is stupid. The $8 record I bought in 1985 is worth more to me personally than whether I'd put that $8 into some account for 45 years. Music, art, etc can't be compared to money. People buy things that add value to their everyday lives. Records, a pair of sneakers, a ticket to a ball game. You, and others, aren't even looking at quality of life. How many of you people spent money on stuff other than your retirement? I can guarantee that the majority, if not all but one or two of you, weren't saving for freaking retirement at age 20.

 

I had a damn good time, went back to school when I was done, and am pretty comfortable with how I lived my life. I wouldn't change a thing. You might think having a minor retirement package at my age, while having a room full of LPs bought over almost 30 years is stupid. I disagree, and I'm pretty sure I'm not alone in that aspect. I have a condo, a fabulous job, a smoking hot wife that I met because I was having fun playing in a band, and we save our fair share. And I bet I'll end up with more in the end than some moron who didn't buy anything and saved every penny instead of living a full life.

 

Here's how I explain it to my clients.

 

"We need to create a nice balance between today and your future. I don't want you saving everything you have today and spend your free time sitting on the porch in a rocking chair because that's all you can afford to do. However I don't want you to not save enough today so all you do during your retirement is sit in a rocking chair because that's all you can afford to do." Many, if not most of us, will spend nearly 30 years in retirement. That's a long time. So yes, you do have to sacrifice somethings today so you can enjoy them tomorrow when you have the time. You need to put pen to paper and figure it out. It's called a long term plan. I wrote out what my retirement will look like a long time ago. I review it regularly to remind me why I'm putting so much aside today.

 

Then there's the DC Tom method and die young.

[Johnny Coli]

But isn't the whole point of the debate is that '40 somethings could have six figure retirement savings if they properly planned for it?

No, the point of contention was that Palin considers herself some sort of average Joe Six Pack, claiming that losing 20k of her retirement money makes her average. My contention with that is that not everyone, and certainly not the average American, has that kind of cash in a retirement package (to lose 20k on Monday puts hers at roughly 230k). I only used myself as an example of an upper-middle class, white collar white guy in his 40s who doesn't, and that it's not a stretch to assume I'm more the norm than the exception.

[finknottle]

I only used myself as an example of an upper-middle class, white collar white guy in his 40s who doesn't, and that it's not a stretch to assume I'm more the norm than the exception.

 

Upper-middle class, white collar white guy in his 40's... who is an avid Democrat. Maybe that's your correlation.

 

I'd be willing to bet that there is a correlation, for comparable income, between being a Republican and the personal savings rate.